MOODY'S UPGRADES LONG-TERM SECURITY RATINGS OF NORTHWESTERN PUBLIC SERVICE COMPANY (SR.SEC. TO A1) AND CONFIRMS SHORT-TERM RATING AT PRIME-1
New York, 01-06-97 -- Moody's Investors Service upgraded the long-term credit ratings of Northwestern Public Service Company (NWPS) and confirmed the company's short-term credit rating for commercial paper. The rating actions follow a restructuring of NWPS's propane businesses into Cornerstone Propane Partners L.P., a master limited partnership. The net effects of this transaction substantially reduce NWPS's net investment exposure in propane distribution, although consolidated earnings will continue to be highly influenced by the overall performance of Cornerstone. The outlook for the company's ratings is now stable. The rating actions conclude a review that began on September 9, 1996.
Ratings upgraded are Northwestern Public Service Company first mortgage bonds to A1 from A2, shelf registration of secured debt to (P)A1 from (P)A2, unsecured pollution control revenue bonds and counterparty rating to A2 from A3, and NWPS Capital Financing I trust preferred capital securities to "a2" from "a3". NWPS's Prime-1 short-term debt rating for commercial paper is confirmed.
During the latter part of 1996, NWPS's subsidiary, Northwestern Growth Corporation, acquired all the common stock of CGI Holdings, Inc., a large retail marketer of propane in the west coast region of the U.S., and it also acquired Empire Energy Corporation, then the eighth largest retail marketer of propane in the U.S. In conjunction with these transactions, NWPS formed a subsidiary, Cornerstone Propane Partners, L.P., to restructure the operations of these newly acquired businesses, along with those of Synergy Group, Inc., Myers Propane Gas Company, and several other smaller propane businesses acquired since August 1995. During December 1996, Cornerstone sold 9.8 million common units to the public and concurrently issued $220 million of senior secured notes in the private markets, which are nonrecourse to NWPS. The net proceeds of about $426 million were used primarily to refund NWPS's preferred stock and debt outstanding relating to its propane operations. The excess cash of approximately $116 million flowed to NWPS, which plans to invest this money in investments similar to its existing preferred stock portfolio. Following these transactions, NWPS's remaining investment exposure to propane distribution is reduced to $12 million.
In addition to its propane and other smaller nonregulated investments, NWPS continues to operate its fundamentally sound core utility business. Although the regulated electric and gas operations face increased competition, they still serve to balance the higher risks associated with the nonregulated investments.
Northwestern Public Service Company, headquartered in Huron, South Dakota, is a combination electric and gas utility, which also has additional investments in nonregulated businesses, including propane retail distribution.
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